Cuối course gồm:

 Income statement (USA) - Statement of profit or loss (UK) - Báo cáo kết quả
kinh doanh
Content: revenue - Expense = Profit/loss
 Balance sheet (USA) - Statement of financial position (UK) - Bảng cân đối kế
toán - Báo cáo tình hình tài chính.
Content: Assets = Liabilities + Equity
 Statement of cash flows - Báo cáo lưu chuyển tiền tệ
Content Cash inflows - Cash outflow = Net changes in cash
 Notes to financial statement - Thuyết minh báo cáo tài chính
 Optional:
o Statement of changes in equity (UK)
o Retained earning statement (US)
- Three activities:
o Identify
o Records
o Com
 The economic events (Business transaction) of an organisation
(Entity has to prepare financial statement)
- Example:
o The company sign a labor contract with a new employee for a monthly
salary of $1000. -> Not an economic event
o The company paid $1000 for employee salary.
-> Salary expense tăng 1000,
- Step by step accounting process:
o B1: Identify the economic event (or business transaction).
Business transaction: (1) Must be expressed in term of money; (2)
affect the company’s financial statement (affect on asset (tài sản),
liability, equity, revenue, expense)
o B2: Record (bookkeeping function: Chức năng ghi sổ) the business
transaction in accounting book: happen during a period.
Collection of evidence: accounting voucher (Chứng từ kế toán)
Rule of recording: (1) by chronological order (By the date) and (2) use a
 consitent monetary unit (VND)
Accouting period (kì kế toán ): Can be a month, a quarter, or a year
(Fiscal year - 12 continuous months).
o B3: End of accouting period, accountant prepares financial statements -
> FS is the mean of communication of financial information to interest
the user.
Conference of shareholder: Hội đồng cổ đông
Board of Director: Hội đồng Quản trị (Đại diện cho cổ đông)
Board of Manager: Ban giám đốc
 Internal user:
o investor
 External users: Taxing authority
o Regulatory agencies
o Labor union
o Customer

Accounting principles

1, Mesurement principles: Nguyên tắc đo lường

- Historical cost principle (Nguyên tắc giá gốc): dictates that companies
record assets at their cost. This is true not only at the time the asset is
purchased, but also over the time the asset is held.
Cost of an asset: all expenditures necessary to acquire the asset and make
it ready for intended use
Example; Jan 1, 2020, the company purchased a land for $100,000 cash.
Other purchase fees: Legal fee $5,000 and broker commision $1,000.
Jan 1, 2020, date of purchase:
Land increases by 106,000
Cash decrease by 106,000
- Fair value principle (Nguyên tắc giá trị hợp lí):

Assumption:

- Monetary unit assumption: requires that companies include in the

accounting records only transaction data that can be expressed in money
 terms. (Mọi số liệu cần được ghi chép dưới dạng tiền tệ. Giả định 1 đồng đầu
năm = 1 đồng cuối năm vì tiền mất giá theo thời gian)
- Economic Entity Assumption: requires that the activities of the entity be
kept separate and distinct from the activities of its owner and all other
economic entities. Typical entity forms are:
o Proprietorship (Sole trader: Công ty tư nhân, unlimited liability
responsibility)
o Partnership (Hợp doanh, unlimited liability responsibility)
o Limited liability company (Trách nhiệm hữu hạn, không nhiều hơn 50
người, limited liability)
o Joint stock company (at least 3 owners)
 Trách nhiệm hữu hạn (Limited liability): Nếu công ty bi phá
sản, chủ sở hữu không cần bỏ iền cá nhân để trả nợ
 Trách nhiệm vô hạn (Unlimited liability): Ngược lại
VD: Công ty mẹ bao gồm nhiều công ty con, mỗi công ty con lại là 1
economic entity. Công ty mẹ và con đều phải lập Financial statement
(báo cáo tài chính), sau đó phải gộp để trỏ thành Consolidate
financial statement (Báo cáo tài chính hợp nhất)
8/9/2024

1,The accounting equation

Assets = Liability + Equity

I invest $10,000 cash in a coffee shop

Equity: Vốn chủ sở hữu, cũng là một loại assets

Assets = Equity

Cash $10,000 = Share capital $10,000

2, The Shop borrow for $5,000 cash from the bank by signing a Note
payable (kế ước khoản vay)

Assets = Liability + Equity

Cash $15,000 = $5,000 + $10,000

Basic accountiing equation: A = L + E must be balanced at any point of time.

 Balance sheet (Statement of financial statement)

3, The shop use $3,000 cash to purhcase coffee material.

Assets = Liability + Equity

=> Cash $12,000 + Raw material $3,000 = Note payable $5,000 + Share capital
$10,000

Assets are resources a business controls, include:

- Cash: Pretty cash, cash at bank (In checking account)

- Note receivable (With interest): Cash in saving account
- Account/trade receivable (khoản phải thu khách hàng): Right to collect cas
from credit customer. (when the company sell goods/provide service on
credit/on account: Chưa trả tiền).
- Inventory: Raw material, finish goods (thành phẩm), WIP (bán thành phẩm),
goods, supplies (dụng cụ, công cụ).
- Property: Plant, and equipment (PPE) = Tangible fixed assets = Tài sản cố
định hữu hình (Land, building, machinery,…)
 Characteristic : Used in normal business operation, large value, long useful
life.
- Financial investment: Investment in property, in other company’s stocks or
bond (Note receivable). Investment in proerty for capital appreciation and in
wating time, it is available

Liabilities: claims against assets, i.e. existing debts and obligations.

- Account payable: Obligation to pay cash for credit supplier (When the
company purchase something on account/on credit)
- Note payable
- Saaries and wages payable.
- Tax payable, interest payable, bond payable

Equity: the ownership claim on a company’s total assets.

- Equity = asset – libability

- Share capital: owner invest cash in exchange to company’s stock
- Retained earnings: lợi nhuận sau thuế chưa được phân phối, được giữ lại trong
công ty.
Use for: Pay dividend (cổ tức) and to reinvestment in business
- Earning for a period = Revenue – expense
Ex: Business open on Jan 1, 2021. In 2021, revenue of $8,000 and
expense of $5,000
Earning of 2021 = R – E = $3,000

In 2022, R = $9,000 and Ex = $11,000

Earning of 2022 = R – E = -$2,000
Retained earnings 31/12/2022 = Earning 2021 + Earning 2022 = $3,000 -
$2,000
4, Exercise:

1, C: $100,000 = 0 + Share capital 100,000

Owner invest $100 cash in exchange for share capital

Analyze: Cash +100 and share capital +100

Equation: Assets = Liability + Equity

Cash 100 = 0 + share capital +100

2, C: 100,000 + $20,000 = 0 + Equity: 100,000 + $20,000 => 120,000 =

120,000

3, C: 50,000 + B: 50,000 + Equip: 20,000 = 0 + 100,000 + 20,000 => 120,000

= 120,000

4, C: 110,000 + B: 50,000 + Equip: 20,000 = L: 60,000 (note payable) + Share:

120,000.

5, C; 110,000 + B: 50,000 + Goods: $20,000 + Equip: 20,000 = L: 60,000 (NP) +

20,000 (AP) + Equity: 120,000

6, C: 110,000 – 40,000 + B: 50,000 + Goods: $20,000 + Equip: 20,000 = L:

80,000 – 40,000 + Equity: 120,000

C: 70,000 +B: 50,000 + Goods: $20,000 + Equip 20,000 = L: 40,000 +

Equity: 120

7, C: 110,000 – 40,000 – 5,000 + B: 50,000 + Goods: $20,000 + Equip: 20,000 =

L: 80,000 – 40,000 -5,000 + Equity: 120,000

C: 65,000 +B: 50,000 + Goods: $20,000 + Equip 20,000 = L: 35,000 +

Equity: 120,000
Equity = Share capital + Retained earnings

Equity = Share capital + revenue – Expense – dividend (Cổ tức: lợi nhuận chia
cho cổ đông)

- Revenues (Doanh thu): are the gross increases in equity resulting from
business activities entered into for the purpose of earning income. Revenues
usually result in an increase in an asset.

o Normal business activities: provide service and sell of goods ->

Service revenue and sales revenue.
o Usually result in an increase in an asset
o Ex: The company provides service for $1,000
Analyze: Service revenue +1,000 (Equity increase) and acccount
receivable +1,000.
o Classification of revenue:
 Operating revenue: Service revenue and sales revenue.
 Others revenue: Rent, interest, dividend + Revenue, gain on sale
of plant assets.
- Expense: are the cost of assets consumed or services used in the process of
earning revenue.
o Salary, wage, interese enxpense, rent expense, tax expense, supply
expense. Depreciation expense, insurance expense, cost of goods sold
(Giá vốn hàng bán.
o Matching principle: let the expense follow the R
o Asset consumed expense: use assets and it becomes expense.
VD: PPE (Depreciation expense), supplies expense, cost of
goods sold
 Service used expense: use a service and it become expense. VD:
Salary, wage, interest, rent, tax, insurance
o Capita expenditure VS revenue expenditure
 Expense: Chi phí
 Expenditure: khoản chi.
 An expenditure become Expense only if the asset is consumed or
service used in the purpose of generating Revenue
 Profit/loss of a period = R – E (Same period)
o Example:
Company provide service for $1,000 cash
Campany pay for 3 months rent for $1,200 (400/m)
Profit/loss of May = R of May – E of May
600 = 1,000 – 400

Next month, purchase $2,000 goods and sale half of it for

$2,500
Sales revenue $2,500
Inventory $2,000
Cost of goods sold: +$1,000 (expense)
Profit/lost of June = 2,500 – 1,000 = 1,500.

Homework:
0. Equation: Asset = L + E
1. Buy cloth 5,000
Analyze: Assets +5,000 Cash = 0 => C: 0 + Cloth: 5,000 = L + E: 5,000
2. Analyze: Cash: 6,000. Sale revenue: +6,000, COGS: +5,000. Inventory: -
5,000
Equation: Asset (Cash: $6,000) = 0 + Equity (Sale R: 6,000; COGS:
+5,000; Inventory -5,000)
3. Analyze: Asset +$6,000, Inventory: +$6,000.
Equation: Asset (Cash 0; Cloth $6,000)= 0 + Equity (Inventory:
$6,000)
4. Analyze: Cash +$4,500, Cloth -$6,000, Inventory: -$6,000, Sale Revenue -
$6,000, COGS: +$6,000
Equation: Asset (Cash $4,500) = 0 + Equity ( Sale R: $4,500 + COGS: $6,000
+ Inventory: -$6,000)
5. Profit/loss of storein 1st Quarter 2021 = 4,500 – 6,000 = -$1,500
Alalyzing business transactions.
Expanding the Balance Sheet Equation for analysis
4 types of dual effecton accounting equation:
- An asset increases, another asset decrease -> total unchange
o Lấy $1000 mua 1 căn nhà. Tiền mất 1000 nhưng có thêm nhà
o Có $1000 cash và $500 máy cà phê -> Đổi máy lấy tiền mặt
- A liability or equity increase, another Liability or equity decreases ->
total L + E unchanged
o The company has a long-term loan (liability) of $100,000.
The company also has owner's equity of $200,000
The company decides to repay $10,000 of the long-term loan using
share capital (which are part of equity). An assest increase, a liability or
equity increases -> both sides increase.
o The company has a loan (liability) of $100,000
The company also has owner’s equity of $50,000
They negotiate to transfer $20,000 into share (equity)
- An asset increase, a liability or equity increase -> both sides increase
o The company has $50,000 in cash (an asset).
The company has $100,000 in liabilities.
They decide to sign a note payable for $30,000
o The company has $50,000 in cash (an asset).
The company has $70,000 in share.
Establish new share for $30,000
- An asset decrease, a liability or equity decreases -> both sides
decrease
o Cash $30,000, loan $30,000. The company uses $10,000 of its cash to
pay off part of the short-term loan.
o The company has $50,000 in cash (an asset).
The company has $50,000 in retained earnings (a component of
equity).
The company decides to pay $15,000 in dividends to its shareholders
using cash, dividend increase but equity decrease.
Statement:
- Income statement:
Revenue of a period – expense 1 period = net income/loss of the period.
- Retained earnings statement for a period (must be the same period of
income statement):
Net income of that period
Retained earning opening period ± −Dividend of that period=Retained earning
Net loss of that period
- Balance sheet at a date (the end of a period):
Asset=Equity+liability
- Statement of cash flows for a period (same period as Income
statement and RE statement)
- Comprehensive income statement:
Fair value principle:
o The company purchases a land for $1M (historical cost). 5 years after,
fair value of the land is $2.5M. If the company actual sold the land for
$2.5M ->
 CHAPTER 2: THE RECORDING PROCESS

Learning Objective 1: Describe how accounts, debits, and credits are used
to record business transactions.

1) Account, Debits, Credits

a) The Account (Tài khoản kế toán):
- An account is an individual accounting record of increases and decreases in a
specific asset, liability, or equity item.

- Asset accounts: Debits increase the Assets account, and credits decrease it.
- Asset accounts normally show debit balances. That is, debits to a specific asset
account should exceed credits to that account.
- Normal balance in the Increase side:
Opening balance + increase – decrease = Closing balance

- Example: Today, you go out with 500,000 vnd, during the day, you purchase st for
200,000 and receive 100,000. At the end of the day, you have 400,000 vnd.
Tomorrow, you go out with "the closing balance" of today 400,000
b) Example:
- The company uses cash to buy material for $1,000
 Analyze: Cash: -1,000 and material +1,000
  Record: Dr Material +$1000
Cr cash -$1000

- The company collects $500 cash for balance due in account receivable.

 Analyze: Cash +500 Account receivable -500

 Records:
Dr Cash +500
Cr receivable -500

- Always Debit (Dr) first, follow by credit (Cr)

- Total Dr = total Cr in a journal entry
Assets = Liability + Share capital + Revenue – Expense – Dividend
Revenue/liability/equity: Credit if increase
Expense/dividend: Credit if decrease.

Learning Objective 2: Indicate how a journal is used in the recording

process.
1) The Journal:
- Companies initially record transactions in chronological order. Thus, the journal is
referred to as the book of original entry.
- The journal makes several significant contributions to the recording process:
 It discloses in one place the complete effects of a transaction.
 It provides a chronological record of transactions.
 It helps to prevent or locate errors because the debit and credit amounts for
each entry can be easily compared.

2, Rule of journalizing.

1. Always Debit first, followed by Credit

2. Total debit always equal total credit in a journal entry

3. Accepting form of compound entry: Dr/Dr/Cr or Dr/Cr/Cr.

Do not Debit more than 2 accounts and Credit more than 2 accounts at the same
time

4. Should divide compound entry into simple entry but do not combine simple entry
to be compound entry because it will be too complicated..

Learning Objective 3: Explain how a ledger and posting help in the

recording process.

1) Ledger:
- The entire group of accounts maintained by a company.
- Provides the balance in each of the accounts as well as keeps track of changes in
these balances.
- Companies may use various kinds of ledgers, but every company has a general
ledger.

Ex: The company starts operation in Jan 1, 2024

1, Jan 1, owner invest $5,000 cash for share cap. (journal book)
2, Jan 5, use cash to buy an equip for $1,000
3, Jan 15, the company borrows $3,000 from the bank by signing a note payable.

Date Account title Dr Cr

Jan 1, 2024 Cash 5,000
Share cap 5,000
Jan 5 Equipment 1,000
Cash 1,000
Jan 15 Cash 3,000
Note payable 3,000
Post to ledge (T-account):

Cash
Opening balance: 0
5,000 (Jan 1) 1,000 (Jan 5)
3,000 (Jan 15)
Closing balance: 7,000

Share capital
Opening balance: 0
5,000 (Jan 1)
Closing balance: 5,000
 Equipment
Opening balance: 0
1,000
Closing balance: 1,000

Note payable
Opening balance: 0
3,000
Closing balance: 3,000
Trial balance
Jan 31, 2024

Account Debit Credit

Cash 7,000
Equipment 1,000
Note payable 3,000
Share capital 5,000
Total 8,000 8,000

Date Account title Dr Cr

June 1 Cash 10,000
Share cap 10,000
June 2 Vehicle 14,000
Cash 1,000
June 3 Rent expense 500
Cash 500
June 5 Account receivable 4800
Service revenue 4800
June 9 Dividend 300
Cash 300

June 12 Supplies 150

Account receivable 150
Jun 15 Cash 1250
Account receivable 1250
June 17 Gasoline expense 100
Account payable 100
June 20 Cash 1500
Service revenue 1500
June 23 Note payable 500
Cash 500
June 26 Utility expense 250
Cash 250
June 29 Account payable 100
Cash 100
June 30 Salary expense 1000
Cash 1000
 CHAPTER 3

Paid $1200 cash for 1 year insurance policy dated May 1, 2020

Dr prepaid insurance (asset) 1200

Cr cash 1200

May 31, adjusting entry for insurance expense of may

Dr insurance expense 1200/12

Cr prepaid insurance 100

Learning Objective 1: Explain the accrual basis of accounting and the

reasons for adjusting entries.

1) Time period assumption:

- Accountants divide the economic life of a business into artificial time periods.

2) Fiscal and Calendar years

- Accounting time periods are generally a month, a quarter, or a year.
- Monthly and quarterly time periods are called interim periods.
- Most large companies must prepare both quarterly and annual financial
statements.
- Fiscal Year = Accounting time period that is one year in length.
- Calendar Year = January 1 to December 31.
- Organizations use the same reporting periods from year to year, so that their
financial statements can be compared to the ones produced for prior years.
- Accounting time periods are generally a month, a quarter, or a year.
- Monthly and quarterly time periods are called interim periods.
- Most large companies must prepare both quarterly and annual financial
statements.
- Fiscal Year = Accounting time period that is one year in length.
- Calendar Year = January 1 to December 31.
- Organizations use the same reporting periods from year to year, so that their
financial statements can be compared to the ones produced for prior years.

3) Accrual-Basis Accounting
- Transactions are recorded in the periods in which the events occur.
- Companies recognize revenues when they completed perform services
(rather than when they receive cash).
- Expenses are recognized when incurred (rather than when paid).
- Accrual-basis accounting is in accordance with IFRS.

4) Cash-Basis Accounting
- Revenues are recorded when cash is received.
- Expenses are recorded when cash is paid.
- Cash-basis accounting is not in accordance with IFRS.

Example:
Followings are transactions occurred in August 2021:
1. Sent out an invoice for $5,000 for services completed this month
2. Received a bill for $1,000 in advertising fees for work done this month
3. Paid $75 in fees for an utility bill company received last month
4. Received $1,000 from a customer for a project that was invoiced last
month
Journalize the transaction and calculate net income/loss based on:
a. Accrual basis
b. Cash basis

ACCRUAL BASIS

1. Dr account receivable 5,000

Cr Service revenue 5,000
2. Dr advertising expense 1,000
Cr account payable 1,000
3.
July:
Dr utility expense 75
Cr cash 75
August:
Dr account payable 75
Cr cash 75
4.
July
Dr account receivable 1000
Cr service revenue 1000
August
Dr cash 1,000
Cr account receivable 1000
Net income of August = R of august – expense of august = 5000 – 1000 = 4000
Net changes in cash of august = cash inflos of august – cash outflow of august =
1000 – 75 = 925
 STATEMENT OF CASHFLOW OF AUGUST

CASH BASIS:

1. august: No entry

2. agust: no

3 July: No entry

August:
Dr Utility expense 75

Cr cash 75

4 July: o journal entry

August

Dr cash 1000

Cr service revenue 1000

5) Recognizing Revenues and Expenses:

a) Revenue:
- Service revenue: recorded when the company completed perform service.
- Sale revenue: recorded when the company transferred the ownership of the goods
to customer.
- FOB shipping point: người mua (Buyer) chịu trách nhiệm cho shipping và trả tiền
ship
 Ownership is passed to the buyer when the seller passed stuff to carrier.
- FOB destination: người bán (Seller) chịu trách nhiệm cho shhipping và trả tiền
ship
 Ownership remains with the seller until stuff reaches the buyer.
- Quyền sở hữu hàng hóa thuộc về người mua khi người bán đưa hàng hóa cho người
vận chuyển. Nếu người bán trả tiền vận chuyển, hàng hóa thuộc về người mua khi
hàng đã đến tay.

Learning objectives 2:
1) Prepaid expense:
Example:
May 5, paid $1000 for rent expense of May
-> Benefit for 1 acounting period only
Dr rent expense $1000
Cr cash $1000

June 1, paid $3000 for rent of June, July, August

-> Benefit for 3 monthly accounting period
Dr prepaid rent (asset) $3000
Cr cash $3000

Post to Ledger

Prepaid rent
OB: 0
3000
CB: 3000
 Cash
OB: 0
3000
CB: 3000

Trial balance June 30

Dr Cr
Prepaid rent 3000
Cash 3000
Total 3000 3000
Cash with credit balance is liability
Adjusting entry for ren expense
Dr rent expense 1000
Cr prepaid rent 1000

Prepaid rent
Unadjust TB: 3,000
1000
CB : 2000

Rent expense
1000

Total: 1000
Adjusted Trial balance June 30

Dr Cr
Prepaid rent 2000
Rent expense 1000
Cash 3000
Total 3000 3000

2) Plant asset (PPE) with depreciation expense

- Depreciation is the process of allocating the cost of an asset to expense over its
useful life. Depreciation is an allocation concept, not a valuation concept.
- That is, depreciation allocates an asset’s cost to the periods in which it is used.
- Depreciation does not attempt to report the actual change in the value of the
asset.
Example: In Jan 1 2020, buy an equp for $5000 cash. Delivery and testing
and installation expenditure is $1000. Manager estimate: useful life is 5
years and residual value (salvage value: Giá trị thanh lí ước tính) is 0
Cost of equip = 6000
Depreciable cost = Cost – residual value = 6,000 – 0 = 6000
-> Straight-line method: Khấu hao đều, khấu hao đường thẳng
Depreciation expense annual = depreciable cost/useful lives in year/month/week =
100

*Note: If the asset purchased on or before the 15 th of a month, account for full
month depreciation
If asset bought from 16th, omit depreciation of this month
-> Do not account for depreciation expense daily

*Note: Unit of activity method and declining – balance method of depreciation

Adjusting entry for depreciation expense at Jan 31, 2020

Dr Depreciation 100
Cr accumulated depreciation of equipment 100
Accumulated depreciation” is contra asset account ( Tài khoản điều chỉnh giảm cho
tài sản)

Accumulated depreciation
OB
Decrease Increase
CB

Accumulated depreciation increase = plant asset decrease

Accumulated depreciation is used to record the accumulated depreciation
expense since the first day of p;ant asset use

Balance sheet at an 31, 2020

Plants asset
Equipment
Less: Accumulated depreciation of equipment 100
= Book value of equip 5,900

Equipment
OB: 0
6000
CB 6000
Adjusting entry for depreciation expense at Feb 28, 2020
Dr Depreciation 100
Cr accumulated depreciation of equipment 100

Equipment
OB: 6000

CB 6000

Accumulated depreciation fo equipment

OB: 100
100
CB 200

Balance sheet at Feb 28,2020

Plant asset
Equipment at cost 6,000
Less: Accumulated depreciation of equip 200
= Book value of equip 5,800

*Note: Open accumulated depreciation account for each inidvidual plant assets
Plant asset
Less: accumulated depreciation of equipment
= Book value of equip

3) Unearned revenues
Example: Yazici Advertising received 1,200 on October 2 from R. Knox for
advertising services expected to be completed by December 31. Yazici credited the
payment to Unearned Service Revenue. This liability account shows a balance of
1,200 in the October 31 trial balance.
Dr cash 1200
Cr unearned revenue 1200
The company has the obligation to provide service for customer in the future.
Oct 31 adjusting entry
Dr Unearned revenue 1200/3=300
Cr service revenue 400
Accrued revenue
In ctober, perform services worth 200 that were not billed to clients on or before Oct
31
Adjusting entry
Dr Account receivable 200
Cr service revenue 200
Oct 1 signed a 3 month note payable in the amount of 5,000 on oct 1. Note
requires Yazici pay interest at annual rate of 12%
Oct 1
Dr cash 5000
Cr note payable 5000
Oct 31 adjusting entry
Dr interest expense 5000 x 12% x 1/12 = 50
Cr interst payable 50
Nov 2 paid for interest of Oct
Dr interest payable 50
Cr cash 50

Accured Salary
Bảng chấm công -> end of month, prepare salary sheet -> Next month, make cash
payment for everyone.

End of month, adujsting entry

Dr Salary expense
Cr Salary payable
Next month
Dr Salary payable
Cr Cash

Alternative treatment
Assume: : Yazici Advertising purchased supplies costing 2,500 on October 5. Yazici
recorded the purchase by increasing (debiting) Supplies Expense (rather than to the
asset account Supplies).
An inventory count at the close of business on October 31 reveals that 1,000 of
supplies are still on hand.
Oct 31 adjusting entry
Dr supplies 1000
Cr supplies expense 1000

Supplies expense
2500 (oct 5) 1000 (Oct 31)
Total: 1500

Supplies
OB:0
1000 (Oct31)
CB: 1000
In Nov 2 purchase 2000 supplies n account, Nov 30, remaining supplies is 500
Nov reversal entry (move opening amount of supplies to supplies expense account)
Nov 2
Dr supplies expense 2000
Cr account payable 2000
Nov 30
Dr supplies 500
Cr supplies expense 500
Total supplies expense = 2500 = OB + purchase – CB

Assume: Yazici Advertising received 1,200 on October 2 from R. Knox for

advertising services expected to be completed by October 31. However, Yazici has
not performed 800 of the services by October 31.
Oct 2
Dr cash 1200
Cr service revenue 1200
Oct 31

Service revenue
1200
Total 400

Unearned revenue
OB: 0
800
CB: 800

Nov 1:
Dr unearned revenue
Cr service revenue

Nov 30

Unearned revenue
OB: 800
CB: 400

Service revenue

Total 400
 Chapter 4
Closing the book

After closing entry, all temporary accounts will have 0 balanced. All permanent
accounts are not cosed. Closing balance of this period wil be brought down to be
opening balance of next month.
Closing entries formally recognize in the ledger the transfer of:
• Net income (or net loss) to retained earnings
• Dividends to retained earnings
Produce a zero balance in each temporary account.
Companies generally journalize and post closing entries at end of the annual
accounting period.

Closing entry
Jan 2024,

1, Dr account receivable 5000

Cr service revenue 5000
2, Dr SW expense 1000
Cr SW payable 1000
3, Dr Utilities expense 1200
Cr account payable 1200
4, Dr dividend 500
Cr cash 500
NET INCOME JAN = R – E = 5000 - 2200
 SW
1000 (2) 1000 (C2)

Income summary
2200 (C2) 5000 (C1)

Service revenue
5000 (C1) 5000 (1)

Utilities expense
1200 (3) 1200 (c2)

Dividend
500 (4) 500 (C4)

Retained earning
OB: 3000
2800 (C3)

Closing entry
C1: to close revenue to income summary
Dr Service R 5000
Cr income summary 5000

C2: to close expense to income summary

Dr Income summary 2200
Cr SW expese 1000
Cr utilites expense 1200
 All expense account have 0 balance

C3: close net income to retained earning

Dr Income Summary 2800

Cr RE 2800

 Income sumary account has 0 balanc

C4: close dividend to retained earning

Dr RE 500

Cr dividend 500

 Dividend account has 0 balance

Post closing trial balance

Because all R, E, D account has 0 balance, in the post closing trial balance, only
permanenlt account (asset, liability, equity)

Ex 2: Jan 2024
 Chapter 5: Accounting for Merchandise Operations
Learning Objective 1: Describe Merchandising Operations and Inventory Systems
- Companies use either a perpetual inventory system or a periodic inventory
system to account for inventory.
- Perpetual inventory system:
 Maintain detailed records of the cost of each inventory purchase and sale
 Records continuously show inventory that should be on hand for every item
 Company determines cost of goods sold each time a sale occurs
 Beginning inventory + Purchases – Cost of goods sold = Ending inventory
- Periodic System
 Does not keep detailed records of goods on hand
 Ending inventory determined by count
 Calculation of Cost of Goods Sold:
 Beginning inventory + Purchases – Ending inventory = Cost of goods sold
- Advantages of the Perpetual System
 Traditionally used for merchandise with high unit values
 Shows quantity and cost of inventory that should be on hand at any time
 Provides better control over inventories than a periodic system
-